FINRA has gotten the SEC's blessing on a rule proposal aimed at helping firms protect seniors against financial abuse.

Under FINRA's new rules, firms will be required to make reasonable efforts to obtain the name and contact information for a trusted person for retail customer accounts. Firms will also be permitted to place a temporary hold on disbursements of funds when there is reasonable belief of financial exploitation.

FINRA sanctions former JPMorgan rep for alleged false claims about fraudulent credit card charges.

The new rule proposal goes into effect on February 5, 2018, according to FINRA.

"These rules will provide firms with tools to respond more quickly and effectively to protect seniors from financial exploitation," FINRA CEO Robert Cook said in a statement.

FINRA's helpline for seniors, which launched in April 2015, prompted the new rules after it highlighted firms’ questions about how to respond when seniors were being exploited, FINRA said.

SAFE HARBOR

Firms will be required to obtain trusted contact information when opening – or updating information for – non-institutional customer accounts. They will also be required to disclose in writing to customers that they are authorized to contact the trusted person and disclose information about their accounts.

Firms will be allowed to place a temporary hold on the disbursement of funds of no more than 15 business days, unless extended by an order of a state regulator or agency or court of competent jurisdiction. They may also be permitted to extend the temporary hold for an additional 10 business days if their internal review supports their belief that exploitation is taking place.

The time-out allows "firms to investigate the matter and reach out to the customer, the trusted contact and, when appropriate, law enforcement or adult protective services, before disbursing funds," FINRA said.

The rule does not require firms to withhold funds and provides them with a safe harbor from certain FINRA rules.

If a firm places a temporary hold, it will be required to notify the trusted person and all parties authorized to transact business on the account no later than two business days after placing the hold, according to the rule proposal.

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